ESG round-up: Munich Re quits Net-Zero Insurance Alliance

The latest developments in sustainable finance: AOA provides guidance on evaluating managers on climate lobbying; only 5% of FTSE 100 have ‘credible’ net-zero plan.

Munich Re has left the Net-Zero Insurance Alliance (NZIA). In an announcement on Friday, the insurance giant withdrew its support from the UN-backed group, which is part of the Glasgow Financial Alliance for Net Zero (GFANZ), while insisting that its commitment to climate is “unwavering”. Munich Re CEO Joachim Wenning said: “In our view, the opportunities to pursue decarbonisation goals in a collective approach among insurers worldwide without exposing ourselves to material antitrust risks are so limited that it is more effective to pursue our climate ambition to reduce global warming individually.” NZIA did not respond to a request for comment.

Another GFANZ group, the $11 trillion Net Zero Asset Owners Alliance, has published new guidance on evaluating asset managers’ engagement efforts around climate lobbying. The paper published Tuesday recommends that asset owners ensure each manager establishes “a process for reviewing the climate objectives and policy positions of its most relevant trade associations”.

Only 5 percent of FTSE 100 companies have “credible” net-zero plans in line with the guidance from the UK’s Transition Plan Taskforce, according to research by EY. The consultancy found that, while 80 percent of UK listed firms have committed to a net-zero 2050 target, the majority have yet to publicly disclose any detailed or actionable transition plans. The 78 percent that have published plans do not address key questions on strategy and execution, while 17 percent are still in the early stages of development.

A group including Eurosif, ShareAction, CDP, the World Benchmarking Alliance and WWF have written to European Commission president Ursula von der Leyen expressing their concern about the commission’s decision to postpone the development of sector-specific sustainability reporting standards. The letter calls for a clear timeline on the European Sustainability Reporting Standards, adding that it is essential for the commission to adopt sector-agnostic standards with minimal changes, as agreed upon by the EFRAG sustainability reporting board.

AXA Investment Managers doubled stewardship activities last year, undertaking 600 engagements with 480 companies, double the total for 2021. Climate change remained the largest area of engagement but biodiversity-linked activity saw a significant increase. The manager said it may vote against company boards that have been insufficiently responsive to biodiversity in the upcoming voting season. AXA IM also strengthened its voting policy last year, adopting a “three strikes and out” policy for companies that are lagging on climate. The updated policy led to a 14 percent opposition rate by the manager, which cast at least one opposing vote in 60 percent of relevant AGMs.

The UK’s Pensions and Lifetime Savings Association (PLSA) has published new stewardship and voting guidelines, including three themes for 2023: the cost-of-living crisis and executive pay, climate change and workforce talent and diversity. Recommendations include extending remuneration structures and incentives for executive directors to all employees and encouraging shareholders to vote against remuneration policies that do not align with the guidelines. On climate, while the PLSA has noted an increased focus on this issue, it said investors should also engage on the sustainability issues which are most relevant to their portfolio.

The Pensions Regulator (TPR) has issued equality, diversity and inclusion guidance for UK pension schemes as part of an action plan launched in September. The guidelines cover the role of the chair in promoting EDI, how to review diversity on the governing body, how to encourage an inclusive governing body culture, and how to attract more diverse talent. PLSA chief executive Julian Mund said more needs to be done to ensure pension schemes “reflect the diversity of the members they serve”, adding that TPR’s new guidance is helpful in providing a framework to focus pension boards’ attention on this issue.

Chair of the railways pension schemes Christine Kernoghan said: “The trustee board welcomes the guidance from the Pensions Regulator on such an important topic that aligns with our own activity and areas of focus. We firmly believe that diverse groups make better decisions which can improve board effectiveness and decision-making.”

Staying on UK pensions, the number of trustees in the UK planning to take responsible investment training in 2023 has dropped to 20 percent from 31 percent in 2021, according to a survey by Hymans Robertson. The pensions consultancy has warned that this could leave pension funds exposed to risks including climate change and greenwashing. In addition, just under a third of respondents plan to commission analysis on how climate risks will impact long-term objectives.

Banque de France has committed to aligning its equity holdings with 1.5C by 2025. The central bank’s responsible investment report, published last week, reinforced fossil fuel exclusion criteria following the announcement last year of plans to exit coal. BdF has also implemented detailed measurement of the impact of biodiversity of its portfolios and, in partnership with the French Prudential Supervision (ACPR), plans to invest in the development of climate stress tests.

Taiwan’s Financial Supervisory Commission has announced that listed companies will be required to have a minimum of one woman on their board to boost gender diversity. At a conference last week, members of the Taiwan Stock Exchange (TWSE) and Taipei Exchange (TPEX) said this would impact several companies, with certain firms planning to list on TWSE or TPEX counting zero female directors. Companies that are already listed will also have to adhere to the new rules, with 28 percent of the almost 500 not having a female director. The commission said TWSE and TPEX are considering giving firms time to appoint female directors before the end of the year. From 2025, listed firms that do not meet the requirement for one-third of their board to be women will have to explain why and provide an action plan.

The Sustainable Development Investments Asset Owner Platform has collaborated with Qontigo to launch a sustainability tool which allows investors to analyse their investment portfolios across a range of SDG-related parameters. The SDI AOP data universe currently comprises more than 9,000 companies which are classified according to their product and service-related revenue contributions to the SDGs. The dataset has recently been updated to include emerging markets fixed income issuers.